Modest gains as financials lead late turnaround

PeterMcKay

NEW YORK (MarketWatch) -- Financial stocks enjoyed a late rally Monday, spurring the broader market to a slight gain as investors bet that major U.S. banks would emerge relatively unscathed from the Dubai debt crisis.

The late gains salvaged what had been a gloomy session through most of the day. Declines in consumer stocks kept major indexes in the red through most of the session amid concerns that the U.S. holiday-shopping season could be lackluster.

The Dow Jones Industrial Average
DJIA, +0.72%
broke into positive territory for good with 45 minutes to go in Monday's session and ended with a gain of 34.92 points, up 0.3%, at 10,344.84, helped by gains in all its financial names. Bank of America
BAC, +0.61%
rose 2.5%, J.P. Morgan Chase
JPM, +0.43%
was up 2.8%, American Express
AXP, -0.19%
rose 2.4%, and Travelers Group
TRV, +0.68%
rose 1.4%. But the average's retail components fell, with Home Depot
HD, +0.65%
off 0.9% and Wal-Mart Stores
WMT, -0.37%
down 0.2%.

The S&P 500's financial sector leapt 2.7% -- more than triple that of the next best-performing category. That rally left the index with an overall gain of 0.3%.

Other major stock indexes managed slight gains Monday. The Nasdaq Composite Index was up 0.3%. The Russell 2000 was up 0.4%.

On the month, the S&P
SPX, +0.59%
gained 5.7%, while the Dow was up 6.5%. Both posted their biggest November gains since 2001. The Nasdaq
COMP, +0.50%
was 4.9% higher on the month.

The dollar fell against both the euro and the yen, while Treasurys were little changed. The 10-year note was up 3/32 to yield 3.198%.

Investors' confidence that banks will benefit from continued efforts by governments around the world to prop up the global economy was bolstered Monday afternoon by reports that the troubled state-owned conglomerate Dubai World was taking steps to restructure tens of billions of dollars in debt.

But participants are also worried about weakness in the non-financial sectors of the global economy. Now that Black Friday, which marks the unofficial start of the U.S. holiday-shopping season, has passed, some money managers are particularly worried that earlier buying in the consumer sector might have been overdone.

"We're still bullish over the long run, but it is a little disconcerting to see the way breadth in the rally has fallen away lately," said strategist Steve Charest, of Divine Capital Markets.

Narrowly based gains traditionally signal that a market is nearing a top, due either for a correction or a full-blown bear market.

Several new economic reports showed improvements. The Federal Reserve Bank of Dallas reported that its index of general business activity moved to 0.3 from -3.3 the month before. The Midwest Manufacturing Index compiled by the Federal Reserve Bank of Chicago rose 0.5% to a seasonally adjusted level of 82.9, its fourth consecutive advance.

However, early readings of holiday shopping activity were mixed. More consumers shopped in stores and online than last year over the four-day Thanksgiving holiday weekend, according to the National Retail Federation. But average spending dropped.

"The consumer is in rough shape, and we don't see any reason to change that view right now," said Malcolm Polley, chief investment officer at Stewart Capital Advisors, which has been out of the consumer sector altogether for more than a year.

Some recent economic data, including gross domestic product, have suggested a budding U.S. economic recovery. However, home foreclosures have remained high and employment weak, suggesting that spending by individuals could remain under pressure.

"The job market trumps everything right now, and it's still in a lot of trouble," said Tim Knepp, chief investment officer at Genworth Financial Asset Management in New York. "In this environment, we're still hearing about a lot of people bargain hunting and spending lower dollar amounts. That can't be good for the overall retail-sales numbers."

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.